Einhorn Questions Herbalife on Call – Share Tumble

Despite beating analyst estimates with their first quarter earnings, Herbalife Ltd. (NYSE:HLF) came under intense pressure this afternoon after comments made by Greenlight Capital’s David Einhorn regarding the firm’s disclosure in their 10-K report. Specifically, Einhorn asked about the change in disclosure regarding the types of distribution groups the firm uses, and went on to ask about how the firm accounts for these figures. What is interesting is that the stock fell on these questions, even though the firm responded positively to the questions, promising to provide the information that Einhorn was requesting.

Einhorn, an activist fund manager, is well known for making bearish calls in the past, including recently regarding Green Mountain Coffee Roasters (GMCR).

After the comments, shares in Herbalife fell over 20%, as debate began whether Einhorn was about to establish a short position in the company. Not all analysts are convinced that Einhorn has the facts right here, including Timothy Ramey at D.A. Davidson who re-affirmed his solid buy rating. Ramey believes the decline in the stock following the questions has more to do with who asked the questions than what the answers revealed.

Herbalife sells weight management, energy, sport and fitness related nutritional supplements through a network of independent distributors. The firm also has a retail presence in China. Herbalife also announced its Q1 results on Monday, earning $0.88 per share, ahead of analyst expectations of $0.81 per share.